My Interview for Enterprise Leadership

A while back I was interviewed by Tom Parish at EnterpriseLeadership.org.  On their site, you will find the following description:

In this podcast, Steve Shapiro, InnoCentive’s vice president of strategic consulting, talks about how InnoCentive’s open innovation model has helped companies solve the most challenging problems.

When the Oil Spill Recovery Institute in Alaska wanted to find out how to pump out the almost solidified oil at the bottom of Prince William Sound from the Exxon Valdez spill, the Institute did not turn to its researchers. Instead they posted a challenge to InnoCentive, an emerging company that specializes in open innovation also called crowdsourcing. According to The New York Times, the Institute paid John Davis, a chemist from Illinois, more than $20,000 for his idea. Davis, an expert on cement, figured that if vibrating cement can keep it from hardening, then a similar concept can be adapted to keep the oil in the tanks from freezing.

Founded in 1998 by three scientists working for Eli Lilly, the major pharmaceutical company, InnoCentive became an independent company in 2001. To date InnoCentive, companies, such as Dow Chemical and Procter & Gamble, and not-for-profits have posted more than 1,000 challenges on InnoCentive. Research areas include everything from business processes to chemistry. Steven Shapiro, InnoCentive’s vice president of strategic consulting, says that today corporations cannot depend on their internal research and development departments to solve their toughest problems. “They need to look at external resources. InnoCentive’s enables these organizations to tap into a global network of 200,000 solvers who enjoy the challenge of competing for a cash reward. Our partnership with the Rockefeller Foundation is helping to solve problems posted by not-for-profits working in poor countries.”

In this podcast, Shapiro explains the reasons for using open innovation to solve tough problems, InnoCentive’s business model for generating revenue, some of InnoCentive’s most successful challenges, the benefits of using InnoCentive, and the challenges this company faces in this economy.

You can listen to (or download) this podcast here.

LG Electronics Uses Open Innovation

According to a press release I received, “LG Mobile Phones (the fastest growing mobile phone brand in North America) is partnering with crowdSPRING (an online marketplace for creative services) and Autodesk (a leader in 2D and 3D design and engineering software) to hold a new competition to define the future of personal mobile communication.”

They were looking for people to “design their vision of the next revolutionary LG mobile phone and compete for more than $80,000 in awards.”  The top prize was $20K.

The competition ended last week, so don’t get your hopes up about winning that money.

But what this shows is that Open Innovation is taking hold in many interesting ways.

Prize-Based Open Innovation, which got its roots in “tangible” challenges (e.g., creating a new chemical compound) has morphed nicely into “softer” (and more subjective) areas like design.

Although, the cost of running this competition is probably far greater than the $80,000 in prizes, I suspect the overall cost dwarfs what would have been spent on in-house designers or consultants.  Regardless, the real value is in the breadth of ideas. Instead of hiring a few designers, they got potentially thousands of designers fighting for the prize money…and the glory of being the winner.  Quite often, the so-called “experts” do not have the best ideas.

Case in point…When I was at (the then) Andersen Consulting, a modified form of Open Innovation was used to develop a new name.  A highly paid advertising/branding company developed a list of 25 potential names.  Other names were submitted by Andersen Consulting employees.  The winning name, Accenture (means “Accent on the Future”) was submitted by an employee – not the branding experts.

In previous blog entries, I wrote about how I used Open Innovation to create my new logo and on the challenges I faced in using Open Innovation.  Open Innovation can be used for anything these days.

As an aside, what I thought was interesting about the LG competition was Autodesk’s participation.  According to the press release, “Autodesk will supply participating designers with a free 15-day trial of SketchBook Pro. Autodesk SketchBook Pro software is a digital sketchpad.” This is a nice way to get designers hooked on their product. Everyone wins in this deal.

I am eager to see the winning designs.

And I am more eager to hear when lessons LG learned by doing the competition. Fortunately, LG has agreed to answer any questions I have (ok, maybe not ANY question).

Therefore, in the name of Open Innovation…

If you have questions you would like me to ask LG, please submit them as a comment on this blog entry.  I will write a future blog entry on the LG competition and lessons learned.

Making Your Products/Services Affordable and Accessible

One of my last blog entries discussed the need to create affordable and accessible solutions as a way of staying competitive. Given  globalization, cheap labor, and a damanged economy, this makes more sense than ever.

Here are three starter questions to ask to help you generate new ideas:

How can you productize a service? One way to make a service more affordable and accessible is to turn it into a physical or digital product; something that requires little or no human intervention. In my earlier entry, I talked about Cybersettle automating insurance claims processing. My Innovation Personality Poker enables people to recreate one of my most popular speeches/workshops. Self-assessment tools can reduce reliance on consultants. Remote diagnostic technologies can speed medical exams and pre-qualify patients before they come to the doctor. Legalzoom.com offers affordable legal advice for people who might otherwise not seek counsel. TurboTax simplifies tax filing. Experts convert their intellectual property into books, mp3s, DVDs, digitally delivered training (including eLearning) systems, or online databases. The possibilities are endless.

How can you offer a low-cost product/service? In an earlier blog entry, I quoted Antoine de Saint-Exupery, author of The Little Prince, who once said, “Perfection is finally attained not when there is no longer anything to add but when there is no longer anything to take away.” I love that.  Ask, “Why are people really using our products/services and what are the bare minimum ways of delivering the desired outcome?” $300 netbooks are stripped down computers because most people want to do word processing and surf the net. Tata is offering a $2,000 car in India (ok, maybe that is a bit too scaled down). Ernst & Young Consulting (now Cap Gemini) once offered a subscription service, Ernie, which provided small businesses with a low-cost alternative to high priced consulting. Dow Corning, the maker of silicone-based products, created Xiameter, an internet-based division that sells product only in bulk… with no call centers.  Which features, services, or qualities can be reduced in order to tap into a new market?

How can I make my product addictive? Drug dealers know that if you get someone hooked on your product, they will come back to buy more. This strategy can be useful for attracting – and retaining – customers. Last month I spoke with the CEOs of three software companies. The one strategy that was pertinent to all three was the development of a stripped down version of the software…and potentially offering it for free. The idea is to get the customer hooked and using the software on a regular basis. Then as the customer’s needs grow, they will need to upgrade (note: this is not the same thing as offering something free today and then charging in the future). I worked with a major computer manufacturer many years ago where this concept was applied. Their flagship computer was (let’s call it) the “F” series. But that was too expensive for most companies, so they introduced a much slower and less expensive computer – the “E” series. Interestingly, the two models were 100% identical except a computer chip was added to the “E” to slow it down. The company knew that many customers would eventually want an upgrade, and they simply pulled out the chip and charged an exorbitant fee.

All three of these strategies move your innovation to the left-hand part of the bell curve (above) rather than the right. All three can be used by any company to augment their existing products and services.  The point is to make your “core competency” available to a broader market – without negatively diverting energies.

I will be including more strategies in future blog entries.

Innovation Cafe

In today’s Wall Street Journal, there is a good article about South Bend, Indiana-based Memorial Hospital’s Innovation Cafe.  The article starts off…

Hungry visitors to Memorial Hospital here sometimes cross the street to its Innovation Café, lured by the outdoor patio with white metal tables and chairs. Inside, however, all they find is fake food and a blackboard listing “recipes” such as “Basic Ingredients for Innovation.”

The Innovation Café is an unusual teaching laboratory created by Philip A. Newbold, the veteran chief executive of this midsize community hospital and health system. He converted a failed delicatessen into a venue where staffers and outsiders can learn to craft new ideas.

In the middle of the article, there are some interesting facts and figures…

He persuaded his employer to become the first U.S. community hospital with an innovation research-and-development budget. The board committed up to 1% of annual revenue for innovation activities. That equals about $4 million a year. The hospital ended up spending just $195,000 in 2005, $622,000 in 2006 and $711,000 in 2007 on innovation efforts such as venture start-up costs and staff training. But the increase in related operating profit was as much as three times the annual expenditure.

These innovation incubators are a great idea. 

But, as the article mentions, the one challenge that can result is too many ideas.  That is why I am a proponent of combining this concept with an Innovation Center of Excellence and “challenge-based” innovation.  To learn more about these concepts, read my article in the European Business Forum. In fact, while you are at it, read all of my innovation articles.

Articles in Thai, Danish and Dutch

Today’s blog entry gives you three feature articles with my thoughts on innovation.  Unfortunately, I have no idea what they say! 

One article is from “Computerworld” in the Denmark (scanned in by a colleague there).  Another is from “High Tech Analysis” in the Netherlands.  And the last is the cover story from “inMarketing” in Thailand.  If you can read any of these languages, you might enjoy the articles.  If not, you might just enjoy the pictures.

Computerworld (Denmark) (pdf – scanned from original)

High Tech Analysis (Netherlands)  (pdf – click here to view original online flash version)

inMarketing - Article #1 (Thailand) (pdf)

inMarketing - Article #2 (Thailand) (pdf)

(click cover to view larger version)

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