Open Innovation Design

Nearly 2 years ago, I used open innovation to develop the logo used on this site.

I am now using open innovation again to help redesign my Personality Poker cards.

As you know, later this year, the Personality Poker book will be published by Penguin’s Portfolio imprint.  The publisher designed the book cover (we aren’t prepared to share that with the world quite yet).  Then, based on that design, the backs of the Personality Poker cards were redesigned to match (image left).

Yesterday, I launched a design project on 99designs.com, the leader in design-based open innovation.  Last time I ran a competition, I had some interesting learnings.

One of the challenges had to do with people building on the ideas of others.  In some respects, this was great.  As a good design was developed, others could help refine and improve.  However, as my article points out, there was a downside: how to choose a winner.

But the other downside associated with a collaborative challenge is “group think.”  As soon as the first idea is thrown out, it tends to influence the thinking of the other contributors, narrowing the set of ideas generated and reducing divergent thinking.  I discuss this concept in my article on the “hand dryer vs paper towel debate.”

Therefore, for the poker card redesign, I decided to go with private submissions.  That is, no one can see what others are submitting.  I will write more about my experience with this next week.

If you are interested in reading the design brief without having to logon to 99designs, you can read it here (pdf).

Or, if you want to submit your own designs for my challenge, go to the 99designs website.

When Open Innovation is not a Tournament

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

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

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.

Hand Dryer or Paper Towels / Collaboration or Competition

At 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.

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