Open Innovation @NASA

October 8, 2010

I am speaking at TRIZCON tomorrow. The opening speaker today was Jeffrey Davis, MD, Director of Space Life Sciences at NASA Johnson Space Center. His excellent presentation focused primarily on the open innovation efforts of NASA.

Here are some of the key soundbites I heard…

  • They wanted to avoid the “serendipity” associated with many innovation efforts, and to create something more predictable.
  • Alliances are THE key to open innovation. Another one is to use the platforms as a way of “managing a network of networks.”
  • He quoted Karim Lakhani from Harvard who once said, “No matter who you are, the smartest people work for someone else.”
  • He said that “putting a call for solutions to the open innovation channels was easy.” But there was a psychological barrier to admitting they couldn’t find the answers themselves.
  • Part of the reason why their efforts were so successful is that they did their homework. They determined which open innovation venue was most appropriate for each challenge. He referred to an article written by Gary Pisano in HBR (you can read an excerpt here).
  • NASA is using three organizations for their open innovation efforts: InnoCentive, Yet2, and Topcoder.

InnoCentive Challenges

Davis spent a large part of his hour talking about InnoCentive. He described them as a “turnkey solution” because challenge writing, vetting and other activities are done by them, reducing the amount of work to be done by NASA. Their InnoCentive challenges yielded responses from people in 65 countries and had a solve rate of about 50%.  He described a few InnoCentive challenges that they ran. Here are three where he had some interesting commentary:

Solar activity cause problems for space travel. If an astronaut is doing a walk during a flare, it can be incredibly dangerous. Therefore they ran a challenge to predict such activity. But instead of posting it as a solar activity challenge, they posed it as a mathematical modeling issue. This broadened the possible sphere of solutions and solution providers. The success criteria for the solution was that the model would need to provide prediction within 24 hours of the solar activity, it needed to be 50% accurate, and within 2 sigma (a quality measure where the higher the number the better). The solution was provided by a retired engineer whose model predicted within 8 hours, was 70% accurate and within 3 sigma. This was a huge improvement over their initial expectations.

Because space travel can last for years, they have a problem with food spoilage. Therefore they ran a challenge to find a food packaging materials that could keep food fresh for 3 years. They found a solution from someone without food experience in Russia who developed a graphite-based material that appears to keep food fresher than regular materials.

Davis indicated that their “micro gravity laundry system” challenge was the least successful. There were two lessons from this. 1) Asking a “system” question was too complex and it should have been deconstructed into smaller challenges (e.g., a valve challenge). 2) Maybe a “higher level” question should be asked. For example, how do we eliminate the need for clothes laundering altogether?

His comments confirmed a few things for me:

  • The laundry challenge highlights two keep points: asking a question that is too abstract leads to fluffy solutions, and asking the wrong question leads to irrelevant solutions.
  • The food packaging and solar flare challenges show that solutions often come from disciplines than are different than where you would traditionally look.
  • There is no one size fits all solution for open innovation. Different challenges require different approaches.

If you want to see my presentation to NASA last year, you can watch it here.

Are You Smarter than a PhD?

July 7, 2010

“Are You Smarter Than A 5th Grader?” is an entertaining show.

In the world of innovation, the biggest question is, “Are you smarter than a PhD?”

Here’s what I mean…

In Personality Poker we address four primary innovation styles.  The spades are the ones who are, as we would say in Boston, “wicked smaht.”

We find that spades are analytical, fact-driven, and often quite intelligent.

One of the challenges with driving innovation into organizations is that smart people are often more interested in being right than doing right.  That is, experts want to believe that they can solve every problem under the sun.  Although this isn’t true, this pervasive belief can circumvent your innovation efforts.

Here’s a simple example…

A few years back, an InnoCentive client identified a very complex challenge they wanted solved.  They posted this challenge to the website.  Anyone who could solve this problem would get a cash prize.  Dozens of solutions were submitted.

One of the solutions was submitted by an employee of the client.  Let’s call her Sally.

Sally went to the individual who sponsored the challenge and said, “Why did you go outside to find a solution?  I already had the answer.”  She was clearly upset that her company went externally to find a solution.

Interestingly, Sally’s actions were the catalyst which helped this client build the case for open innovation.

When the evaluation team evaluated all of the solutions submitted, Sally’s was not viewed as innovative.  It was the same type of solution the company had been considering for years.  The breakthrough idea came from someone outside of their company and even outside of their industry.

The company now had proof positive of the value of open innovation.

To be clear, the objective of open innovation is not to replace the smarts you already have in your organization.  It is to augment this brilliance.  Most companies don’t have enough time to solve all of the challenges they are working on.  Unfortunately, R&D people often get spread thin working on a lot of different types of challenges, some of which could be better solved by others outside the company.

Here’s a simple model I use to help companies determine which challenges should be solved externally, versus those that can be solved internally. Challenge fall into roughly three broad categories:

Simple: These are challenges that someone else has probably solved.  Although you could solve them internally, this is not the best use of your resources.  The odds are that someone else already has a solution that you could buy or license for less money in less time.  Why waste your highly specialized experts on these types of challenges?

Unsolved: There are some challenges that are exceptionally complex that may have remained unsolved within your organization for years.  Or maybe it is something that is viewed as outside your area of expertise.  A well-worn, but useful example of this is the oil spill recovery in Alaska after the Exxon Valdez accident. For 20 years, oil/gas experts futilely tried to find a way to pump out the almost solidified oil at the bottom of Prince William Sound.  Eventually, through a challenge posted on InnoCentive, they found a solution from the cement industry, not the oil/gas industry.  John Davis, a chemist with expertise in 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.  It worked and solved a two decade old problem. These challenge are also best solved externally because you can increase the level of diversity in your solver base.

Differentiator: These challenges fall into the sweet-spot of your organization.  These are the challenges that your experts are best equipped to solve.  By “outsourcing” the simple and unsolved challenges, you can allow your team to focus on what they do best.  This will increase your ability to solve the problems that differentiate you from your competition.  For these types of challenges, it is often useful to post challenges internally, using a tool like InnoCentive’s @Work solution.  This allows you to tap into the collective intelligence of every employee, regardless of where they reside organizationally or geographically.

Smart people want to be (and should be) appreciated for their brilliance.  They have dedicated their lives to the pursuit of knowledge. But as the late, great Will Rogers said, “There is nothing so stupid as an educated man, if you get off the thing that he was educated in.

Everyone can not be educated in everything.  Therefore, figure out what you (and your organization) do best, and find others to help with everything else.

NESTA Open Innovation Conference Videos

April 14, 2010

Last week I spoke at an event hosted by NESTA – the UK’s National Endowment for Science, Technology, and the Arts.

The day focused on Open Innovation and had some spectacular speakers including Cheryl Perkins (the former Chief Innovation Officer for Kimberly-Clark), Karim Lakhani (an open innovation guru from Harvard Business School), Stefan Lindegaard (a well-known expert on open innovation), and Helmut Traitler (from Nestle).

You can watch my opening remarks here. (8 minutes)

On the NESTA website, you can watch all of the other videos including my panel discussion, some Q&A, the morning panel, and more.

NOTES: A few quick comments on my opening remarks video: 1) For those in the US…Pop Idol is the UK version of American Idol. 2) I was a little over eager with InnoCentive “Solver” count. We have over 200K, but not quite a quarter of a million…yet. 3) There are many versions of the Edison quote…the one I prefer is, “I have not failed 700 times. I have not failed once. I have succeeded in proving that those 700 ways will not work. When I have eliminated the ways that will not work, I will find the way that will work.” Admittedly, I’m not sure what he actually said since I wasn’t there.

My Interview for Enterprise Leadership

March 23, 2010

A while back I was interviewed by Tom Parish at  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.

Is Crowdsourcing Disruptive?

March 22, 2010

There was an excellent post by Hutch Carpenter on the blogging innovation website.  In the article, he asked the question – “Is Crowdsourcing Disrupting the Design Industry?”  He makes an excellent case for the value (and pitfalls) of crowdsourcing design work.  As readers of this site know, I have used design crowdsourcing on several occasions.

In response to the article, I wrote…

I use crowdsourcing for some of my designs. And I have to admit, I do sometimes feel a little bad. It’s clear some people put a fair amount of thought into their designs. Sadly, there is typically only one winner.

Having said that, as a consultant, no one feels bad for me when I spend days or weeks developing a proposal that does not get awarded to me. We recognize that it is the cost of doing business.

Let’s face it…for some design work, it might be just as fast to develop a rough concept as it would be to develop a compelling proposal. Crowdsourcing can reduce the time and effort involved in selling design services.

And crowdsourcing, when done correctly, can give you (the “Seeker”) benefits that you would not get through conventional means.

Right now I am running a crowdsourcing competition for a design for my Personality Poker cards. The competition has been running for 2 days, and I received some amazing designs. Because I did a blind competition, everyone has to develop their own idea, rather than simply build on the idea of someone else. This is enhancing the level of creativity significantly.

The winner will get follow on work from me in fleshing out the concept and in future design work. [NOTE: The competition is over and I received 32 designs of which a half dozen of them were fantastic]

I used to use eLance (an eRFP site) for design work. But the results were not always great. Plus each designer has to submit a proposal and decide upon a fee. With 99designs, the designer knows the “prize” and can decide if they want to invest any effort at all.

It’s not spec work that is changing the rules. It is access to the masses. Personally, I would prefer to pay for a solution than a proposal.

I do think, if done well, design crowdsourcing can be beneficial to all involved.

Crowdsourcing has the potential to give designers a reach they have not previously had.  Although their cost per design might go up, their cost of acquisition might actually go down. Proposals are a cost of doing business – and you don’t win every proposal.  Spending time/money on finding customers who want the proposal in the first-place is another cost – and you don’t acquire every customer you target.  Mailing marketing materials to potential customers is another real cost.  The list goes on.   The real cost/time associated with marketing/selling design services is not insignificant.

Crowdsourcing allows you to convert your marketing/selling time into design time.  Your only cost is your time to develop the submitted designs.  This feels like a much better use of design resources.

What We Don’t Know We Know

February 22, 2010

Last night I went to a seminar.  On the whiteboard, the seminar leader drew an oft-used framework:

There are things you “know.”  For example, I know I can speak English.

There are things you “know you don’t know.”  I know I can’t speak Chinese.

And there are things you “don’t know you don’t know.”  Obviously I don’t have any examples of this.

But it got me thinking.  There is one dimension that is never mentioned…

There are things you “don’t know you know.”

Inside of organizations, there is so much untapped knowledge.  To combat this, over the past two decades, companies have invested millions of dollars in knowledge management systems.  The objective has been to capture the company’s knowledge.

The problem is, the knowledge management databases usually become so large and unwieldy that they are unusable.  I can attest from experience that these systems often end up becoming digital piles of untapped information.  Finding what you want can be like finding a needle in a haystack.  Or, more accurately, it is like finding a specific needle in a stack of needles.

What’s the solution?

You might call it, “reverse knowledge management.”

Instead of posting knowledge which sits passively in a database waiting for someone to find it, you post your question to your “community” so that it can be answered at the time of need.  Of course, asking the world for an answer to your question is not new.  Yahoo/Google Answers did this a few years back.

But internally, especially when you have already invested in knowledge management systems, the dynamics can be quite different.

If you are using an internal collaboration tool like InnoCentive@Work, you might find that reverse knowledge management is an unintended benefit.  When you have a challenge you want solved, the odds are, someone else within your organization has already solved a similar problem.  But you probably don’t know who knows the solution or where to find the solution.

Sometimes the solution can be sitting in your knowledge management system…and you don’t even know it because it is too difficult to find.

Interestingly, “requests for information” posted on internal collaboration tools are sometimes solved not by the individuals with the expertise, by rather by the knowledge management team.  When a question is posted, the knowledge management team masterfully scours their databases to find a solution.  The advantage of this approach is that those with expertise in navigating the knowledge management systems do what they do best, thus freeing the rest of the organization to focus on what they do best.  And it has the added benefit of breathing new life into your old knowledge management initiatives.

So, what is it that you organization doesn’t know what it already knows?

P.S. I have to admit that I am a bit surprised.  If you Google “reverse knowledge management” (in quotes) you will see that the only place this term is used on the entire internet is in this article.

When Open Innovation is not a Tournament

February 18, 2010

A magazine asked me to write a book review of Innovation Tournaments by Christian Terwiesch and Karl Ulrich. The book arrived in the mail yesterday and I immediately turned to the index to see if InnoCentive was listed. Sure enough, we are mentioned in several places in the book.

This got me thinking: Is InnoCentive a tournament?

The word tournament is derived from the French word for “medieval sport” and is now used to describe a wide variety of competitions.

Most competitions/tournaments are quite entertaining. And by their very nature, there is always a winner. One could argue that tournaments are “spectacles designed to find a champion.”

Given this widely held point-of-view, using the word tournament as a descriptor of InnoCentive seems to be inaccurate.

The NCAA basketball championships are a tournament. The “World Series of Poker” is a tournament. American Idol is a tournament. With each of these, there is always a winner. The purpose of the tournament is to find that winner while (usually) providing entertainment value.

InnoCentive is not interested in finding a winner for the sake of naming the champion. The objective is to find workable solutions to real business problems. Their approach is one I call a “contingency-based, value-driven pricing model.” Admittedly, that does not sound as sexy as calling it an innovation tournament.

Here’s how it works. A company has a problem they want solved. They decide the “value” of finding a workable solution and they offer a “bounty” to anyone who can provide one. The bounty is only paid when they get what they need. This “pay for solution” model outsources the risk associated with complex problem solving.

Here are other examples that illustrate the key difference between the bounty-based approach with the tournament-based approach.

The NetFlix Prize was not a tournament.  They only paid the team that improved the recommendation engine by 10%.  This makes is a bounty-based approach. You only pay the bounty when you get a successful solution.

In contrast, The Cisco iPrize, can be thought of as a tournament. According to their website, they will “select up to 32 semifinalist teams that will work with Cisco experts to build a business plan and presentation… Up to eight finalist teams will present their business ideas to a judging panel to compete for the grand prize: a $250,000 award shared equally by members of the winning team.”  The LG Electronics competition (read my article on it here) was also a tournament-based approach.

The key difference is the way the challenge is articulated.  With the bounty-based approach, the success criteria is clearly defined and you know if someone provided a successful solution:  Did you improve the recommendation engine by 10%?  Did you find a chemical compound that has specific properties?  Did you develop a mathematical model that optimizes solves a specific problem?  The “winner” of the bounty is determined by this success criteria.  If the criteria is not met, the bounty is not paid.

With the tournament-based approach, the success criteria is not defined.  The winner is the “best” of the submissions.  Although these types of competitions can yield excellent solutions, I know from inside-information that the results are often less than stellar.  One company that uses this type of tournament described the results as a “PR success yet a commercial failure.”

Both approaches can provide value to any organization.  It’s just important to recognize that they are useful in different ways.  Tournaments can be great to get a broad set of ideas for an undefined space.  Bounties are great for when you are hunting down usable solutions.

Interview on The Small Business Advocate

February 17, 2010

Jim Blasingame is one of the best talk show hosts out there. And I had the pleasure, once again, of being on his show. This time I talked about the challenges associated with innovation and the value of open innovation.

This was my 6th appearance on his show. You can listen to all of them here.

Three Innovation Distinctions (Part 3): Diversity not Homogeneity

February 1, 2010

This is the third of my “innovation distinctions” entries. [for your convenience, all three articles have been packaged into one pdf file]

In the first part of this series, I wrote why you should focus on “Challenges, not Ideas.” Next, I addressed the distinction of “Process, not Events.”

In this final entry, I discuss why innovation requires “Diversity not Homogeneity.” Be sure to read the previous two articles before reading this one.

As mentioned in the other blog entries, I first shared these distinctions with a group of speakers and authors who were brainstorming ways to improve the learning experience for other speakers and authors who attend their conferences. Here’s the Catch 22: Having only speakers and authors speaking to other speakers and authors does not lead to much creativity. Most of the “ideas” presented are well-worn and don’t address the “real world” outside of the industry.

Therefore, my last suggestion to the group was to increase the level of diversity at these learning experiences. This would provide a wider range of ideas, suggestions, and points-of-view.

How does diversity apply to an organization?

Diversity can mean a wide variety of things:

  • Diversity of race, creed, color, sex, etc
  • Diversity of innovation styles
  • Diversity of disciplines

I won’t address the first point as that has been a topic of discussion for decades. Let me tackle the next two.

Diversity of Innovation Styles
The second point ties directly to my Innovation Personality Poker system.

In the card-based game, I discuss the four primary innovation styles: analytical, creative, planning/action, engagement.  Most organizations favor one over another and therefore do not have a good balance of styles. There’s a reason for this.

Although homogeneous teams are often more efficient (i.e., you get things done faster), having a bunch of “yes men” working for you is not the answer for long-term growth. When people think too much alike, new ideas struggle to surface. In these homogeneous climates, innovation and growth (i.e., effectiveness) suffer.

The essence of successful companies, then, is the ability to be both efficient and effective. They are able to focus on both production and innovation, not just doing things right but also doing the right things.

There’s plenty of evidence that team diversity translates directly into corporate profits. Sigal Barsade and colleagues at the University of Pennsylvania’s Wharton business school studied top management teams at large corporations in the United States. Interestingly, the more diverse the functional roles of the members of those teams were, the greater the average, market-adjusted financial return in those companies. Diversity of the top leaders translated into bottom-line results.

In Personality Poker, there are four key concepts:

  • You need people in your organization “play to their strong suit.” That is, make sure that everyone understands how they contribute to and detract from the innovation process. This includes ensuring that you have the right people with the right leadership styles in your organization.
  • As an organization, “play with a full deck.” You must embrace a wide range of innovation styles. Instead of hiring on competency and chemistry, also hire for a diversity of innovation styles. Every step of the innovation process must be addressed. You need people who are great at conducting research, delivering results, developing plans and reports, building relationships, and creating new ideas, amongst other things.
  • Deal out the work.” That is, you must divide and conquer. You can’t have everyone in your organization do everything. Instead, get them to divvy up the work based on which style is most effective at a given task. You can’t have everyone generating ideas, or focusing on planning.
  • Recognize that in order to treat everyone the same, you must treat everyone differently. People have different needs in terms of how they like to be managed, how they like to be praised, and how they want to contribute to the organization. In order to attract and retain a well-balanced organization you must be prepared to treat people as they want to be treated. To do this, you must overcome the inertia of your company’s personality and embrace the needs of the individual personalities.

I could write a whole book on the value of diverse teams.  Oh, wait, I did!  My Personality Poker book will be published by Penguin’s Portfolio imprint Fall 2010.  Throughout, I provide examples of, and evidence for the value of having a diversity of “styles” within your organization.

But what about the third type of diversity: The diversity of disciplines.

Diversity of Discipline
A discipline is any area of expertise like biology, chemistry, physics or mathematics. You can have an organization comprised of diverse innovation styles while sharing only one discipline.

A while back, I spoke with Al Bredenberg, Senior Researcher from ILO Institute. He subsequently wrote an excellent blog entry on the topic of diversity where he quotes me. He also mentions a Harvard Business Review article by Lee Fleming that suggests that companies with less diversity of discipline produce better overall financial results than highly diverse ones.

“The financial value of the innovations resulting from such cross-pollination is lower, on average, than the value of those that come out of more conventional, siloed approaches. In other words, as the distance between the team members’ fields or disciplines increases, the overall quality of the innovations falls…. But my research also suggests that the breakthroughs that do arise from such multidisciplinary work, though extremely rare, are frequently of unusually high value—superior to the best innovations achieved by conventional approaches…When members of a team are cut from the same cloth, you don’t see many failures, but you don’t see many extraordinary breakthroughs either.”

However, as the diversity of disciplines increases, “the average value of the team’s innovations falls while the variation in value around that average increases. You see more failures, but you also see occasional breakthroughs of unusually high value.”

Therefore, although there is value to diversity of disciplines, the challenges seem to outweigh the benefits.

What’s the solution to having a diversity of disciplines without having to deal with the inherent complexities?

Open Innovation. By working with companies like InnoCentive, you get the value of discipline diversity while having few of the downsides.  You get the take advantage of a wide range of experiences while only paying for successful solutions.

I will write more on Open Innovation in subsequent entries.

The Bottom Line
Diversity can create incredible value for an organization. It can help facilitate the innovation process. It can help increase the quantity and quality of breakthrough ideas. The key is knowing the right way of managing and engaging a diverse set of perspectives.

Three Innovation Distinctions (part 1): Challenges not Ideas

December 23, 2009

Last week I was with a group of extremely successful entrepreneurs in Las Vegas. I was a bit of an outlier as my background is mainly with large, multi-billion dollar businesses. Everyone else in the room came from the start-up world. Also, nearly everyone in the room worked exclusively with speakers and authors. Although I too am a speaker and an author, it was clear that my perspectives were a bit different than everyone else in the room. Or as one entrepreneur said, “Steve, you have distinctions in innovation that we don’t.”

So they asked me to share my point of view. What I shared were three simple distinctions on innovation.

  1. Challenges not Ideas
  2. Process not Events
  3. Diversity not Homogeneity

In today’s blog entry I will focus on the first point. Subsequent blog entries will address the last two points.


Signal-to-Noise Ratio
One of the most important, yet under-considered measure in the innovation process is the signal-to-noise ratio. The signal-to-noise ratio is the ratio of a signal power to the noise power corrupting the signal. In layman’s terms, it is the ratio between what you want and what you don’t want. For example, in audio recordings, it is the ratio between the music and the background noise.

Organizations do not have a shortage of ideas. They have a shortage of good ideas that matter.

In innovation, the signal is comprised of the good ideas. The useful ideas. The ideas that can and will ultimately be implemented in such a way that they create value. The noise is made up of all of the other ideas. Useless suggestions. Solutions to problems that don’t matter. Ideas that will never come to fruition.

To increase innovation’s your signal to noise ratio the first thing you want to do is stop asking for ideas.

Drowning in Ideas

Suggestion boxes are cluttered with noise. The amount of time required to sift through the chaff to get to the wheat is huge. And even when you do find a good solution, the amount of effort required to rally to troops to implement the problem is huge.

The innovation team of a large retail bank implemented a major suggestion box program. They received thousands of ideas. Evaluators looked at every idea.  In the end, none were implemented. In the aftermath of their efforts, they asked me for my observations.  In hindsight, the submitted ideas could have been categorized into 3 groups:

  1. Duds: A large percentage of the ideas were clearly not worth pursuing. These ideas were not new, or were unlikely to show a positive ROI.  However, even with these, there might have been a nugget of usefulness that was missed.  However the energy to nurture these nuggets was probably not worth it.
  2. False Negatives: There were, from my perspective, many ideas that were indeed good. But for whatever reason, the evaluators dismissed them.  Part of it had to do with biases of the evaluators.  Sometimes it was due to a lack of knowledge on the part of the evaluators.  And often, it was because the ideas were not fleshed out enough making it difficult for them to be properly judged.
  3. Good, But No Home: This was the most disconcerting category.   These were ideas that were good ideas that the evaluators liked, but sadly they had no organizational home. As a result, the ideas withered on the vine and were never implemented.  They never got the resources or funding necessary to move them to the next level.

The company’s innovation program lasted a total of 18 months.  It was shut down and deemed a huge failure.

I have seen similar results in other organizations. One large company I know has a competition each year where employees submit new product ideas. The winner gets a large check and the company implements the best idea. I asked the person responsible for this program if it was viewed as a success. The answer was, “It was a PR success but a commercial failure.” The competition generated buzz in the media, but none of the products have yet to generate a positive ROI. Contrast this with their more focused efforts on creating or improving specific product lines. In nearly every case, these were commercial successes. Their idea-based programs did not generate good bottom-line results, while their challenge-based initiatives did.

The other issue with ideas is that there is no level of accountability. Because people tend to develop ideas on their own time, there are no time tracking methods that can keep tabs on how much energy is invested in idea generation. If you encourage ideas, I suspect that you are spending a lot more money on those initiatives than you could ever imagine. You might be able to measure the ROI of a winning idea. But I doubt you can determine the ROI of your overall ideas-based program. There is no way to know how much time was spent on the thousands of duds that never see the light of day.

The Power of Challenges

Contrast this with challenges. With challenges you assign owners, resources, evaluators, evaluation criteria, and funding up front. We know that the solution to a challenge will be relevant to the needs of the organization, so if a solution is found we know it will be valuable. Also, because of the nature of challenges, we have better tools to evaluate the amount of time spent on finding solutions. We can truly measure the ROI of each challenge and the overall challenge-based program.

Some of you may see a loophole in my logic. You might think, “Ok Steve, why not just post a challenge that asks for new ideas. This would seem to be a challenge-based approach. But of course all you are getting back are ideas.” This is true. And this is why it is important to discuss the construction of challenges.

The Goldilocks Principle

Good challenges must adhere to the Goldilocks Principle. That is they can’t be too big (broad, novel, abstract – e.g., asking for new ideas) or too small (overly specific). They must be “just right.” As Dwayne Spradlin said in his InnoCentive blog entry on the topic:

For example, the big problem is not the need for a new drug for a neglected disease, it is the elimination and/or minimization of the human suffering caused by the disease. The right questions might include: How do we limit transmission? How can we cost effectively produce treatments that comprehend market based economics to ensure a sustainable model? How do we distribute treatments in the developing world? Even these questions require further decomposition until we get to well formulated challenges (e.g., Can we get 5X more vaccine into the hands of those that need it in the context of real world economic, cultural, and political constraints in Sub-Saharan Africa?).

The key is good challenges. The right challenges.

A lot more could be said on this topic. But I will close with a quote from Albert Einstein, who in 1938 said, “The mere formulation of a problem is far more often essential than its solution, which may be merely a matter of mathematical or experimental skill. To raise new questions, new possibilities, to regard old problems from a new angle requires creative imagination and marks real advances in science.”

I couldn’t have said it better myself.

[for your convenience, all three articles have been packaged into one pdf file]

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