Are You Smarter than a PhD?

“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 InnoCentive.com 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.

Measures: Will You Get What You Want?

I recently spoke with a new client who shared with me their innovation measures.  When I looked at their measurement system, I immediately saw flaws.

But before addressing these imperfections, let me first provide you my perspective on innovation measures.

In general, there are three types of measures associated with “challenge-based” innovation (be sure to read this article if you are unfamiliar with the concept of challenge-based innovation):

1. Process Measures - These measure the activity associated with your challenges (e.g., 500 registered solvers, 40 submissions per challenge, 80 votes per challenge, etc)
2. Solve-Rate Measures - These subjectively measure how well you solved your challenges (e.g., 82% of challenges were partially solved, 61% of challenges were completely solved, etc)
3. Value Measures – These measure the actual value accrued (e.g., increased revenues by $25M, reduced costs by $35M, etc)

The last measure (value) is where the rubber meets the road.  This is your ultimate goal.  But sometimes, value realization can take years (or in the case of pharmaceutical companies, decades).  Therefore, the second measure (solve-rate) is a good way to monitor progress with your program.  But what about process measures?

Process measures are leading indicators that can be useful in measuring trends over time for things like community engagement, effectiveness of internal communications, and quality of challenges.

Let’s look at one common process measure: the number of ideas/solutions submitted for a given challenge.  This was one of the measures that my new client used.

Imagine that you are using crowdsourcing to find a solution to a challenge.  You post the challenge on your website or intranet.  A month later you check to see how many responses you get.  In this scenario…

Which is better:

• getting 100 ideas/solutions?
  or
  
• getting only 2 ideas/solutions?

Most people intuitively think that 100 solutions is better than 2.  In fact, most organizations believe that more ideas equates to greater success.  The reality is, however, that 100 is not necessarily better than 2.

Let me re-frame the question…

Which is better:

• getting 100 ideas where only 2 of them were exactly what you needed and the other 98 were duds?
  or
• getting 2 ideas where both were exactly what you needed?

Now the correct answer is a bit more obvious.  In this situation, the latter is probably better.  The amount of work needed to sift through the solutions is a lot less when you have only 2 submissions.  Imagine if you received 10,000 ideas of which only 2 were good.  You can see now that the effort to find the best solutions/ideas might be overwhelming.

Although activity is good, too many submissions can indicate that you have a poorly defined challenge.  Therefore the ratio of good ideas to duds might be a more interesting measure.

The key is, make sure you understand the unintended consequences of your measurement system, especially when it comes to process measures. If done properly, process measures can help you drive higher solve rates (measure #2). And often, higher solve rates lead to greater value (measure #3) in the long run.  But not always.

High solve rates with low value can also indicate problems with your innovation program:

• Poor implementation – You are unable to convert solutions into finished products/services
• Poor commercialization – Your solutions do not meet the needs of the market/customers and therefore do not generate revenue
• Poor relevance – Your challenges, although solved, are not important enough to “move the needle” of the organization’s innovation efforts

Measures are important for helping tracking your innovation efforts.  And they can help diagnose potential issues.  But it is important to measure the right things.

There is an old expression: “You will get what you measure.”

But the bigger question is, “Will you get what you want?”

NESTA Open Innovation Conference Videos

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

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.

Is Crowdsourcing Disruptive?

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.

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