Hand Dryer or Paper Towels / Collaboration or Competition

December 9, 2009

Hand Dryer Paper TowlAt the Open Innovation Summit last week, I had a lively conversation with a few individuals. The debate was about which model of open innovation is most effective – competitive or collaborative.

Kevin Boudreau and Karim Lakhani wrote an excellent article earlier this year in the MIT Sloane Management Review on this very topic. They looked at the merits of each form of open innovation. I encourage you to read the article as it addresses factors like intrinsic and extrinsic forms of motivation.

InnoCentive uses both forms of open innovation in different environments.

Their “marketplace” model is competitive. That is, when posting challenges to their network of 185,000 experts, the solvers cannot see any of the other solutions. One reason for using this model is that the intellectual property needs to be protected.

This is in contrast to InnoCentive’s @Work product which is used to broadcast challenges internally to employees. With this product, solutions are provided in a collaborative fashion where solvers can see all responses. Given that only employees are participating, intellectual property issues are not as critical.

The competition/collaboration debate reminds me of the Miller Lite commercials – “Tastes Great…Less Filling.”

It also reminds me of the hand dryer versus paper towel debate (in terms of efficacy – not impact on the environment, which is a different debate).

After much experimentation, I have the long awaited answer: Use paper towels first followed by the hand dryer. The paper towel gets off most of the water so that the hand dryer can quickly evaporate the remaining liquid. The best solution for drying your hands is not one approach, but a combination of the two… in the right order.

I believe that the answer is the same for the competition versus the collaboration debate. It is not an either/or proposition.

From my experience, you start with competition followed by collaboration. Here’s why….

If you start with collaboration, you end up with “group think” very quickly. That is, as soon as the first idea is thrown out, it tends to influence the thinking of the other contributors. This narrows the set of ideas that are typically generated. Therefore, if you start with a competition, you get the broadest set of ideas possible.

Then, after selecting the winners of the competition, you take the best ideas and allow a collaborative community to flesh them out. This gives you get a much richer solution in the end.

This approach models the most effective way of running brainstorming sessions. It works best when you first have each person independently write down their own creative ideas. Only after everyone generates their own list does the group come together. Then they share ideas, select the best ones, and expand upon those best ideas collaboratively. Individual thought followed by group throught. Competition followed by collaboration.

IMHO, the same is holds true for open innovation.

Of course there are a variety of factors that may “require” the use of one approach over the other (e.g., intellectual property protection), but there are even ways to address that. But more on that in another blog post.

P.S. I’m serious about using paper towels first followed by the hand dryer…
P.P.S. If you are not aware, I am InnoCentive’s Chief Innovation Evangelist.
P.P.P.S. It was pointed out that I use the word “ideas” in this post.  To be clear, when I say ideas I am referring to solutions to the given challenge.  I am a big believer that idea-driven innovation (i.e., give me your best idea) tends to lead to sub-optimal solutions.  I am an advocate of challenge-driven innovation (i.e., give me your best ideas that can solve this specific problem).  Although the difference may appear to be subtle, in reality the difference is significant.

Why Edison Was Wrong

August 7, 2009

Last night I had an enlightening conversation with Alph Bingham, the co-founder of InnoCentive from Eli Lilly.  This guy is fascinating!

Alph suggested that many people do not like open innovation (external crowd sourcing) because it runs counter to a widely held belief of the R&D community.  Researchers often throw around the Edison quote, “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.”

Researchers use this quote because it “validates” the iterative development innovation process; the cornerstone of most R&D departments.  They have convinced themselves that they learn as much from their failures as they do from their successes.  Call it what you want, the 700 attempts were failures.

When some R&D people look at open innovation, they see it as linear rather than iterative: post a challenge and get a solution.  This seems inconsistent with their belief in learning from failures.

Alph made the point that in the R&D world, the value of iterative development is overrated.

What if Edison found a solution to the light bulb challenge on the first try?  Would that be bad?  Would he have continued to find the 700 ways that did not work?  Did the 700 failures really add that much value?  Can R&D organizations afford to fail 700 times?  Not in today’s competitive environment.

Alph suggested that open innovation is a massively parallel process where failures and successes happen at the same time.  You post a challenge and you get dozens or hundreds of solutions.  Some won’t work.  But all you need is one solution that does work.  And with open innovation, you only pay only for the solutions that do work.  Failures cost you nothing in terms of time and money.  With internal iterative development, you pay for the successes and the failures.  Do you really learn enough from your failures to justify the extra cost and time involved?

Alph’s perspective is fascinating and I fully agree with him for analytical/deterministic challenges.  Creative challenges and their solutions, on the other hand, often can’t be proven correct until they are tried out in the real world.  Iterative development – via small and scaling experiments – may still be the best approach for solving less deterministic problems.  I call this approach the “build it, try it, fix it” model.  Having said that, the iterations could potentially be staged as a series of open innovation challenges that continue to refine concepts until they are market ready.  This would be a massively parallel iterative creative development.  Very cool.

This got me thinking about a conversation I had with an executive from Chrysler many years ago while I was working at Accenture.  I asked him who he felt his biggest competition would be in the future.  He pointed at me and said, “You.”  Although he was half-joking, it’s true that the role of car manufacturers these days is less about manufacturing and more about integration.  The Accentures of the world are masterful at integration.

And maybe this integration skill is the MOST important skill for your organization to have.

As platforms like InnoCentive continue to grow, problem solving of all types –creative and analytical – will be outsourced in a massive parallel way to a huge network for solvers.  If we take this to an extreme where all challenges are outsourced via crowdsourcing, the role of a company would only be to integrate these solutions together into a seamless offering.

Although this is easier said than done, this one skill may be critical for the survival of your business…and maybe even the US economy.

China and India have a growing base of highly educated engineers and experts.  Eastern European countries and parts of Asia have large creative bases.  The world is truly flat.  And all of these countries have people who are willing to work for pennies on the dollar.

If we try to beat these countries at their game, we will lose.  We could never educate enough people.  And even if we could, our workforce would probably not be willing to labor for lower wages.

Integration is the key.  Yes it is difficult.  And that is good news.  While the rest of the world is focused on the trees (the point solutions to specific challenges), we need to become masterful at defining the forest (the strategy, architecture, and integration of the point solutions).  This is where value is created.  And this is much harder to outsource.

It reminds me of something from my 24/7 Innovation book I wrote back in 2001…

“(As innovators,) we are architects of companies and industries.  An architect is not a ‘reengineer.’ To illustrate this point, I often ask clients what is the difference between an optimist, a pessimist, a reengineering consultant, and an architect. The optimist looks at a half filled glass of water and sees it as half-full. The pessimist looks at the same glass and sees it as half-empty.  The reengineering consultant sees too much glass. Cut off the top. Downsize. An architect looks at the same glass and asks questions such as ‘Who’s thirsty?’ ‘Why water?’ Or ‘Is there another way to satisfy the thirst?’ It is this questioning, challenging and rethinking that differentiates architects from those who rearrange the deck chairs on The Titanic.”

Find solutions everywhere.  Embrace open innovation.  And think like an architect. Ask the difficult questions.  Assess what matters most.  And build a core competency around integrating point solutions.

Remember, we are no longer in the tree business…we are in the forest business.

InnoCentive Seeks Experienced Innovation Consultants

August 5, 2009

I completed my first month as InnoCentive’s “VP Strategic Consulting & Chief Innovation Evangelist.”  In a short period of time, we made excellent progress on a number of fronts and will be announcing our plans shortly.  My next task is to build my team.

And maybe that is you!

I am looking for a number of highly skilled innovation experts who want to help me launch this exciting new venture.  In short, I am looking to hire people who are passionate about…

  • delivering innovation consulting to several clients at the same time. Our unique “catalyst” model reduces the amount of time spent with any one client while improving results.
  • participating in sales activities of the company. Although this involves some lead generation (no cold calling), most leads will be generated by a dedicated sales team. The consultant’s primary sales role is focused on proposal development.
  • creating intellectual property and methodologies that will help the consulting team be more effective and ensure consistency of delivery.

If you want to get a sense of my high level innovation philosophy, please read the following articles:

You can learn much more about the role from the InnoCentive Innovation Consultant Job Description

If you have questions, write me at steve@24-7innovation.com.

I want YOU for innovation!

P.S. As of December 31, 2009, we hired all of the people we need for now.  We expect to start hiring more people in the middle of 2010.  Feel free to write if you are interested and we will keep your resume on file.

The Open Innovation Formula?

July 29, 2009

Today we have a guest blogger. In an earlier entry, I held a contest to see who could guess how many ideas were submitted as part of the LG Electronics competition. One of the respondents provided a detailed assumption analysis and complex equations. Although the assumptions proved inaccurate (read the actual answers), I felt that his thought process provided an interesting perspective on crowdsourcing and wanted to share it with you.

Introducing Rishi Bhalerao…

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Steve and I have exchanged e-mails on the methodology to estimate the number of entries and related metrics in the LG challenge. Even though my numbers ended up quite far from the observed data, Steve thought the process was worth describing because it raised some interesting questions. Here is the “Cliff Notes” version of the method; a more detailed explanation is included in the attached pdf file.

Steve asked for an estimate of the number of entries and the number of unique participants. Here are the steps I followed:

  1. I assumed that the larger the payoff, the more entries a contest will attract. The public data available on crowdSPRING (the online platform used to run the LG Electronics competition) is too limited to allow a regression analysis, so let’s simplify and just assume “Pro” projects—those with a minimum $1000 payoff—attract more entries than “Non Pro” projects with smaller payoffs.
  2. The blog entry crowdSPRING By The Numbers indicates that, since launch, 4700 projects have attracted 370,002 entries (average: 79 entries/project). The website lists active projects (158, when I checked on July 23) and also indicates the number of entries received by each Non Pro project. From this sample, we can calculate the average number of entries per Non Pro project. We can then deduce, assuming the sample is representative, that the average number of entries for a Pro project is ~97.
  3. The next big assumption (which turned out to be flat wrong) is that each payoff attracts a separate set of entries. So, if this project has 43 payoffs, it will attract 43X the number of entries compared to an average Pro project with a single payoff. There were 3 big prizes and 40 consolation prizes. First place received $20,000, second place received $10,000, third place received $5,000 and 40 entries got $1,000 plus an LG phone.
  4. The number of unique participants was somewhat tricky, because the average entries/participant cannot easily be guessed from the sample. I took a SWAG from my experience in customer service: a single customer generates 1.2 transactions. I didn’t have a better benchmark–particularly not one that was relevant to crowd-sourced graphic design. Turns out the actual entries per participant are ~2.6 (834 entries from 324 participants) which suggests the marginal cost of a second entry is much lower than that of the first.

How accurate were the assumptions? Not very! But, they do raise interesting questions:

  • What explains the relatively low number of entries? The max $20K payoff was 45X the average ($444 or $2 million over 4,500 completed projects) but it attracted just 11X the average participation (824 entries instead of 79). 324 participants represent less than 1% of the 36K user base advertised on the site.
  • How does the number of payoffs affect participation? Clearly, entrants weren’t motivated by 43 separate payoffs. More likely, they were looking at the top two or three prizes. Could LG have received the same number of entries with a significantly smaller payoff (e.g. by not offering the 40 $1K prizes)? Do such contests have value beyond solving the stated design challenge? E.g. brand affinity, perception of engagement, mind share, etc?
  • What lessons should crowd-sourcing platforms draw on size of participant networks vs. level of engagement? Are more entries always better?

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Rishi, thanks for sharing your thoughts on this. I love your thinking and want to add a few thoughts of my own.

  • Challenge Complexity – The complexity of the challenge has something to do with the number of submissions. Logo competitions receive a lot of entries because they can be created in a matter of minutes. A phone design is much more complex and might be perceived as too time intensive. As a parallel, although I don’t know this to be true, I suspect that the $1 million InnoCentive challenge to find an ALS marker has had fewer entries than challenges with a $10K reward. The complexity to reward ratio must be considered.
  • Solver Base – Many of the people registered on crowdSPRING are logo/graphic designers. They may not be equipped to solve more complex problems. Although the 36K solvers might be great at logos, they may be less skilled at phone design leading to fewer submissions. This may account for why InnoCentive has such a high solve rate on technical challenges that are in their “sweet spot.” They have 180,000 highly technical solvers. However, if you posted a logo design on InnoCentive, I suspect you would have very few entries.
  • Awareness - Of course, awareness of the challenge must be factored in. If people are not aware of the challenge, they cannot respond. LG Electronics did a fantastic job of spreading the word. Having said that, I know of many people who would have entered, but unfortunately were not aware of the competition until it was too late.
  • Challenge Definition – There are other factors that need to be considered. For example, when I did a logo design competition on 99designs (a competitor of crowdSPRING) I had a few entries in the beginning. But as I provided feedback and people saw what I liked, the numbers of entries exploded. The fuzzier the challenge, the harder it is for people to get their hands around it. This is why InnoCentive invests A LOT of time helping frame the challenge before posting.
  • Intangibles – One thought I had is that incentives can sometimes be a barrier to innovation. A saw a fantastic comment on a discussion thread about crowdSPRING from yongfook. He said, “The quality of open source software is high, not because of crowdsourcing, but because of personal motivation to be involved with a project you have some emotional connection to. With (crowdSPRING) the motivation is more monetary… pretty much every professional designer I know wouldn’t touch any of these freelancing sites with a barge pole.” Interesting.

Ok, what do all of you think? What factors are we missing? Can you develop an accurate formula to predict participation in a crowdsourcing/open innovation challenge?

It’s Official!

July 15, 2009

Innovative Logo

Innovative Logo

Two weeks ago, I jumped the gun a bit when I announced my new role with InnoCentive.  Now it is official.  Amongst other things, the press release issued today says…

With its new strategic consulting offering, InnoCentive will help organizations benchmark their open innovation readiness, develop custom innovation approaches and advise them on how best to engage in the cultural and process changes necessary to be successful. This in turn will give organizations the tools to make open innovation repeatable and predictable, like other capabilities in their business.

Timed with the announcement is a blog entry I wrote for the InnoCentive website.  Given my work on Innovation Personality Poker, I focused my thoughts on the different innovation styles.  Here are some of the thoughts from that article…

As I followed InnoCentive and observed the success of the Solver community, it got me thinking about how problems are solved.

From my research on innovation personality styles, I have observed that there are two broad ways of solving challenges: relational/creative and rational/analytical.

Steve Jobs, President of Apple Inc, once said, “Creativity is just having enough dots to connect . . . connect experiences and synthesize new things. The reason creative people are able to do that is that they’ve had more experiences or have thought more about their experiences than other people.”  This beautifully articulates how creative/relational problem solving works.

To date, most InnoCentive Challenges have been more technical in nature and are typically solved through a more rational/analytical approach.

When looking at these two styles, I realized that InnoCentive Solvers are perfectly positioned to use BOTH innovation styles.  To explain why I believe this, let’s explore what happens in the brain when solving Challenges…

You can read the rest of the article on the InnoCentive blog.

I am thrilled to (now officially) be working with an amazing company that is changing the world one challenge at a time.

P.S. My other title is “Chief Innovation Evangelist.” This links to my quote in the press release where I say, “InnoCentive already has a strong reputation for open innovation. My role will be to expand this reputation to encompass innovation in general.”  UPDATE: The official name for my group is “InnoCentive Consulting: The Architects of Challenge-Based Innovation.”

P.P.S.  As mentioned in my earlier blog entry, I will continue to give speeches on innovation and write books.

InnoCentive’s Chief Innovation Evangelist

June 29, 2009

I am thrilled to announce that as of July 1st, I will become the “Chief Innovation Evangelist” for InnoCentive.

If you are not aware, InnoCentive is an incredible company that is changing the world.  They are leaders in the Open Innovation space.  If you have a problem you want to solve, you can post the challenge on their website, and their network of 160,000 solvers will work to find a solution. Although it started off as a tool to accelerate R&D for a pharmaceutical company, it has expanded into solving all types of problems ranging from corporate challenges to social issues.

InnoCentive is incentive-based innovation.  The person who provides the solution gets a monetary reward that is established up front.  For example, if someone can find a biomarker for ALS, they will get $1 million.

There are some amazing success stories.  One well-publicized challenge was the removal of oil that remained trapped after the Exxon Valdez accident back in 1989.  A solver applied his knowledge of the cement industry to the challenge and won $20,000…and solved a problem that perplexed scientists for two decades.  Watch the video…

I’ll discuss more about my specific role over the coming weeks.  To give you a clue…my corporate title is “VP Strategic Consulting.”

I am thrilled to be part of an organization that is changing the world, one challenge at a time.

P.S. I will continue to write books and give speeches in addition to my InnoCentive work.

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