Innovation happens elsewhere: rethinking your business to grow and compete
Around 70 executives recently took part in a highly participative IMD Discovery Event to understand the concept of open innovation that is currently democratizing invention and product development, by opening them to the masses and creating more choice for consumers than ever before. Businesses that fail to embrace open innovation run the risk of being left behind.
Open innovation is a way to stay on top of the competition, reduce costs, spread risks, and bring new products to the market more quickly. It takes place in two ways: by tapping into the creativity and brainpower of many through crowdsourcing, and by opening up a company’s internal ideas to the external community. For traditional companies, the biggest barrier to embracing the external community is pride—“we know our customers best.” Today, companies have to admit, “we don’t know everything.” Historically, LEGO depended on its marketers to make big bets on the products of the future, but in 2008 it changed its approach and launched LEGO Ideas, a crowdsourcing site on which anyone could submit suggestions. Fans then voted and LEGO produced limited editions of the best and most popular concepts with great success.
Often confidentiality is cited as a major barrier to open innovation, but it does not have to be. DARPA (the US Defense Advanced Research Projects Agency)— responsible for developing emerging technologies for the military—wanted to make a new amphibious infantry vehicle from conception to manufacture in one-fifth of the typical timeframe. So in 2013, it issued a challenge to all Americans to build FANG—Fast, Adaptive, NextGeneration Ground Vehicle. How did DARPA effectively leverage non-experts to contribute meaningfully to a highly technical military challenge? It lowered the barriers to participation and democratized innovation by:
■ Clearly spelling out the objectives and the specifications.
Allowing people to work autonomously or to form teams.
Dividing a complex problem into sub-systems. The vehicle was designed through three competitions for (1) mobility and drivetrain; (2) chassis and structure; and (3) the whole vehicle. Giving registered participants access to META, DARPA’s library of digitally rendered vehicle components and mechanical parts.
Making design and simulation software available so that components could be manipulated to create new parts. Collaboration tools allowed team members to work together virtually on a shared design. The participants received feedback on their design, which they could resubmit.
Offering a cash prize of $4 million. Intrinsic motivation stemmed from a sense of contributing to nation building, making an impact, prestige, and recognition.
The above example raises a number of questions for managers: How are their companies positioned in terms of innovation? Where do they need to be? Are they willing to make basic investments to seed innovation in novel ways? How can internal employees as well as external partners be motivated?
a time for deconstruction
Five out of the top six companies by market capitalization in 2016 were tech companies: Apple, Alphabet (Google’s parent), Amazon, Microsoft, and Facebook; Exxon Mobil was the only non-tech company. Given the explosive growth of highly innovative, networked businesses, Professor Haanaes deconstructed company types, from traditional manufacturers to network orchestrators, through the lens of business models to understand how value is created.