Open Innovation is now widely recognized as a way to enhance options for innovation by accessing external assets. However it can mean many things to many people; from running a crowdsourced idea scheme like Lego Ideas or MyStarbucksIdea, through to large co-branded initiatives like Senseo.
In the middle of this spectrum lie Open Innovation joint development projects. Put simply, these are projects where two or more companies work together to launch a product or service, usually exploited in the market place by one of the partners. But these can take many forms.
THE MISSING PIECE
This arrangement usually starts with a validated market opportunity and recognition that there is a piece of the technology jigsaw that is missing. Smart companies then go outside to look for that missing piece. Most often that is an enabling technology without which the project would not even get off the ground. The lead partner then adapts the technology and launches the product.
A quick view of the challenge section of Innocentive’s website amongst many others gives an idea of what some companies need. Intermediaries such as Innocentive, NineSigma and Strategic Allies will also take on specific and confidential searches for the missing piece.
The partnership usually involves two companies working closely together through the whole development project, often right up till launch. Quite often one partner will become a supplier to the other, providing a key component or ingredient without which the product will not work. In many cases the supplier will provide the whole product for their partner to sell.
A good example is Procter & Gamble’s Olay Regenerist, which arose from a joint development with Sederma.
The Orchestra project has several partners, each contributing a key element to the eventual product or service. Usually, there is a conductor, a “hub” company who writes the music, arranges the orchestra and conducts the process. A good example is Nespresso, orchestrated by Nestlé. The Swiss company Eugster/Frismag developed and now manufacture the core elements within the machines using Nespresso capsules supplying the key elements to their branded machine partners such as Krups.
Another is consumer air care devices, where the conductor brings together different partners who are expert in electronics, sensing, electrical device design, fragrance formulation, testing methods and packaging.
Intellectual Property (IP) is a key consideration in Open Innovation, and particularly in Orchestra projects. The conductor must be able to exploit the fruits of the project without infringing the IP of the other members of the orchestra. The IP rules need to be established at the start of the project, which is why these types of projects may take longer to get off the ground.
THE “READY TO GO”
This type of project starts with a product close to final development or even already on the market, owned by (usually) a smaller company. A larger company with an identified need and who regularly scan markets around the world using technology scouts may find a product already on sale which closely matches what they are looking for. A good example is Procter & Gamble’s Swiffer range, which was originally found in Japan.
Of course it is rare to find a product that doesn’t require any work before launch. But the principle of “Ready To Go” is more about finding something that has shown both market and technical feasibility, and consumer desirability, thereby accelerating product launch.
Every now and then, companies face an opportunity so important, so crucial to their future that it becomes too risky to rely on only one option. In those cases it is worth running a duplicate project with an external company, aimed at producing exactly the same result as the internal project.
In a previous corporate lifetime I had direct experience of this situation. We set up two project teams, one internal and one external. There was a target bonus riding on the project, and our initial view was that the bonus should go to the “winning” team, consistent with best bonus principles of paying out on results, not effort. We quickly realised that this would not be the best way to drive collaboration and sharing of information, so changed the conditions such that a bonus would be applied if a project hit the targets. After all, what matters for the company is that the right product is delivered. The result? We hit the target, with the external team getting there first.
No matter which Open Innovation project design you choose, the people elements are key to consider, along with the classic OI elements of IP; income flow and division; and multilateral project management. It’s worth thinking through your options for project design right at the start.
image credit: westmont.edu
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Kevin McFarthing runs the Innovation Fixer consultancy, helping companies to improve the output and efficiency of their innovation, and to implement Open Innovation. He spent 17 years with Reckitt Benckiser in innovation leadership positions, and also has experience in life sciences.