School of Business OPEN Innovation Anne Sigismund Huff University of Ireland Maynooth.

School of Business

OPENInnovation

Anne Sigismund HuffUniversity of Ireland Maynooth

SCHOOL OF BUSINESS 2

AGENDA

Define Innovation Sources of innovation Three interesting trends

• Open innovation• User and customer innovation• Service innovation

Management’s contribution to• Disruptive Innovation• Incremental Innovation

School of Business

What is an innovation?

Why is it important?


Invention*

….

2. U.S. Patent Law . a new, useful process, machine, improvement, etc., that did not exist previously and that is recognized as the product of some unique intuition or genius, as distinguished from ordinary mechanical skill or craftsmanship.

*invention. (n.d.). Dictionary.com Unabridged. Retrieved October 09, 2011, from Dictionary.com website: http://dictionary.reference.com/browse/invention


Innovation*

Although the term is broadly used, innovation generally refers to the creation of better or more effective products, processes, technologies, or ideas that are accepted by markets…

* http://en.wikipedia.org/wiki/Innovation, accessed Oct. 9, 2011

SCHOOL OF BUSINESS 6 © Anne Sigismund Huff

Multiples Levels of Innovation

Network Innovation

Corporate Innovation

Organizational Innovation

Functional Innovation

Individual Innovation


IT IS NOT EASY TO BRING SOMETHING NEW TO MARKET


Of 197 products brought to market

124 immediate failures 54 lose money 17 mediocre results

ONLY 11 successful (11/1919 = .006%)

BIG ISSUE: How to generate enough quality ideas to reach market success


2nd big issue -- Diffusion “The Classic S-Curve”

Time

De

gre

e o

f T

ech

no

log

ica

l Ass

imila

tio

n


PROBLEM

SOLUTION

HOW I GOT FROMONE TO THE OTHER


Figure 2.3: Thomas Lackner (Siemens)The Most Important Innovation Strategies and their

Positioning along the Technology Lifecycle*

Pace-setting technologies: Determine tomorrow‘s

competitiveness

Key technologies: Determine today‘s

competitiveness

Basic technologies: Basic competence

for today‘s business

New technologies: Discontinuity New rules of the game

Time

First mover“The early bird catches

the worm“

(American saying)

Fast follower“The early bird catches the

worm but the second mouse gets the cheese“

(G. Keillor)

Trendsetter“If you‘re in control of

wormholes and mouse-traps, you get both –

the worms and the cheese“

© Siemens AG. All rights reserved*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.


Different Foci of Innovation

Look forward: Invention & Innovation

first mover and fast follower Look backward: Expand markets, develop products

performance by implementation Look outside: Suppliers & other stakeholders (those

who care, especially customers – YOU) Look inside: Products/services/experiences,

processes, structures from those close to delivery


3rd issue: disruption of the status quo

Incremental innovation close to current markets, close to current products

Radical (disruptive) innovationFarther from current skills and current markets


Figure 2.2: Thomas LacknerDifferent Paths from Innovation to the Market*

Existing NewTechnology

iPod - iPhone

LED

MRI

ICE 1-3

• Easy to use• Attractive design

• New imaging technology• Other diagnostic possibilities

• Brighter• Lower power consumption

• Incremental improvement

IV

I II

III

© Siemens AG. All rights reserved

*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.

School of Business

Where do ideas come from?

Who develops them?


YOU are an important innovator

Young• Energy and enthusiasm• Less influenced by the past• Today’s and tomorrow’s consumer

University trained• Increasingly important cutoff for employment

(and thus consumption)Helpful frameworks and tools to address new

situations


1. Hold your mobile phone

2. Think individually of new hardware features (not available now) that you would like your phone to have

3. Quickly list these ideas one at a time going around the group with no comments except clarifications

4. Encourage new ideas to emerge 5. Each person vote on 3 that you like best6. Report on winner(s)

Possible group exercise


Why group?

New ideas will come to you as you hear what other are thinking of [ A myth that inventions spring fully formed from one person’s mind]

Why strangers?

Innovative solutions often come from varied & unexpected sources

Why mobile phone?

A product most of you use and care about

Mobile phone hardware and apps still changing

(clear room for innovation) Why hold your phone?

More ideas in context


Why think individually before discussion?Groups tend to head quickly in one direction

One or two people tend to dominate

“Social loafing” is too easy

Why list all ideas before development or evaluation?Basic brainstorming: do not evaluate too soon

Make sure all are involved (otherwise ideas from high status tend to have too much weight)

Finding from research: best ideas build on others


Why vote on three?Helps separate idea from the proposer

Maintains a large idea pool

(don’t fall in love too soon)

Why report on winners to a larger group?Again, keep the pool large

Expect further building on ideas from others

Research shows that a winning idea is often generated late in the innovation process


You can train yourself to be a better innovator

Learn about and use creativity techniques (web)

Analyze new product/services/experiences on the market• Anticipate innovations• Predict outcomes

Keep up with the news and think about innovation at different levels

- Economies – Governments

- Industries – Companies

- Public organizations - Individuals

– Groups (e.g. sports enthusiasts)


Even more important!

Learn how to work effectively in groups

(inventions often first developed by one, innovation to market almost always involves many)

Become a student of organizations, especially your organizations

Continually improve your communication skills Learn how to make things HAPPEN

•Lean toward action

(ALL GOOD CAREER ADVICE IN GENERAL especially important in an era that is emphasizing innovation)


BUT (as we will discuss) invention and innovation are not always welcome


Disruptive innovators tend to be

‘Wild ducks’ with a divergent point of view though at the same time success comes especially to those who are socially connected

Dissatisfied with the status quo but aware of how it works

Persistent, able to learn from negative experience Supported by someone who listens and believes

but also challenges• A partner/friend• A co-worker• A leader

SCHOOL OF BUSINESS 26 © Anne Sigismund Huff

NIH

“not invented

here”

Not surprisingly, innovations are often resisted


Figure 4.6: Rudi GrögerA Small List of Arguments used to Slow the Change Process*

We tried that beforeThis place is different

It costs too muchThat‘s beyond our responsibility

We‘re all too busy to do thatThat‘s not my job

It‘s too radical a changeWe don‘t have the timeThere‘s not enough help

Our place is too small for itIt isn‘t practical for operating people

The folks will never buy itThe union will scream

We‘ve never done it beforeIt‘s against regulations

It runs up overheadWe don‘t have the auhtorityThat‘s too ivory-tower-like

Let‘s get back to realityThat‘s not our problem

Why change it? It‘s still working okay

It‘s hopelessly complexYou are right, but...

You‘re two years ahead of your timeWe don‘t have the personnel

It isn‘t in the budgetIt‘s a good thought, but impractical

Lets give it more thoughtTop management would never go for it.

Let‘s put it in writingWe‘d lose money in the long run

It‘s never been tried beforeLet‘s shelve it for the time being

Let‘s form a commiteeHas anyone else ever tried this?What are you really saying is...

Maybe that will work in your department, but it won‘t in mineThe executive committee will never ...

Don‘t you think we should look into that further before we act?Let‘s all sleep on it

It won‘t pay for itself.I know a fellow who tried this way

What would the president say?

*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.

School of Business

New innovations for generating innovations?


Three interesting developments

1. Open innovation

• Within the organization• With selected communities• Open to an unrestricted audience

User / customer innovation

Service innovation (80% plus of most GNP)


Open Innovation to expand the “solution space”for ideas that can make it to market

“ assumes that firms can and should

use external ideas as well as internal ideas, and

internal and external paths to market…”

Henry Chesbrough, Open Innovation (HBPress 2003)(http://www.openinnovation.net/)


An Example of OI from within an Organization From Robinson & Stern*

• Japan Railways East (largest rail carrier in the world) constructing new bullet-train north of Tokyo– Slowed by water in tunnel through large mountain– Engineers drew plans to drain away

• Maintenance worker (job = safety of tunnel equipment) – Noticed that workers were enjoying the water – Proposed the railroad should bottle and market it as a

premium drinking water

*Corporate Creativity (Berrett-Koehler, 1998)


Water not JR’s core business but they had captive market

Vending machines on 1,000 platforms Advertising emphasized purity of snow,

slow process of melt percolating through unusual geology (picking up healthy minerals)

Home delivery

Bottom line: $47 Million sales within a few years


Key recognition of Open Innovation

“Not all the smart people work for this organization”

- (Bill Joy, Sun Microsystems)

• Many people with good ideas • Not all work for R&D department within an organization

(some in engineering, marketing, maintenance! etc.) • Not all work for this organization

• Many good ideas from suppliers and customers• POTENTIAL suppliers or customers• Smart people with relevant knowledge located in

unexpected locations


Figure 2.9: Thomas Lackner*Open Expert Networks for Enterprises –

Why do we Need Communities?

Organizational and hierarchal barriers

Business processand business project

specific barriers

Local, time, cultural and language barriers

"Isolated knowledge

islands"

=+ +

Open expert networks connect existing knowledge within the company

Employees with different expertise contribute their knowledge voluntarily

Focus is on technologies with clear business impact

Cross-sector networks leverage competitive edge of an integrated technology Company

© Siemens AG. All rights reserved*From Huff et al. (forthcoming) Leading Open Innovation. MIT Press.


OI #2: Broadcast need for new innovations to experts outside the company

Knowledge Broker

Context1. Major multinationals not able to solve certain scientific problems

2. Go to distributed group of scientists who may have an answer

Firm R&D Labs

Firm R&D Labs

Firm R&D Labs

Firm R&D Labs

InnoCentive.com


Karim Lakhani (HBS) found that InnoCentive is a VERY efficient mechanism for technical problem solving

Examined 166 problems• Firms spent 6 months to 2 years trying to solve • Offered $30,000 for solution on average• Solutions need to be submitted

within ~6 months of initial posting

How many problems solved?• 49 problems (29.5%) [More recent studies over 50%]• 75 solution awards given

Participation Patterns• Average of 240 individuals examined detailed problem statement• Average of 10 solution submissions per problem• 65% of solvers had PhDs in scientific disciplines, 35 % did not

have PhD• Average time spent ~74 hours by winning solvers

~36 hours by non-winning solvers


Not just about business

We connect people with charitable projects they may not otherwise find througn an online market place where users can browse ways to help others around the world.


OI 3: Not just about experts

Jiten Karia, “Harnessing the power of citizen scientists” FT Weekend Magazine, Oct 15/16 2011, pg. 49.

“Players of Foldit, an online protein-folding game that allows the public to contribute to scientific research, have solved the structure of an enzyme know to cause Aids in rhesus moneys, providing a new lead in the design of retroviral drugs. The structure had eluded scientists for 15 years but was solved in just two weeks by the gamers.

The announcement…came in the same week that researchers behind the Planet Hunters project revealed that their citizen scientists may have discovered two new planets associated with distant stars.”


Business Model “Barilla Pasta”

Presented by:

Andreas Schwertsik

Ulrike Mumm

Tobias Hack

Anja Bürkle

Trend 2: Innovation using information from customers & potential customers


Data from Storylistening

(method developed by Olaf Rughase)


Barilla is perfect

Cooking time exactly specified

You know whatyou get

Barilla = Italy

Most/many different/beautiful shapes

Good price-performanceRatio in Italy

Doesn’t sticktogether

I eat pasta almostevery day

Stays al dente

Different numbersof spaghetti

The prettier the shape,the fancier has to

be the sauce

Cook in a lot of waterwith crude salt and

without oil

Recipe is on the back of the box

Italian barilla tastesdifferent from

Barilla in Germany

I bring Barillafrom Italy

I don’t only eat to get full, but because I feel like

pasta and a special shape

Barilla is the standard

Only few shapesin Germany

Costs twice as much in Germany

big “blue” shelfIn the supermarket

There is also fresh Pasta made by Barilla

There are betterPasta-brands in

italy

Only Barilla is inboxes

Nothing falls outwhen box is

open

Sauce doesn’t stick to Barilla

Therefore I prefer fresh

pasta

Barilla sauces areNot good andToo expensive

It’s easy to tell thedifference between

Cheap&expensive Pasta

There were special potsfor spaghetti

Italians


I don‘t distinguish between egg or durum wheat

Barilla only has 500 gr packs

Package inconvenientCan not be selaed airtight

Commodity

Rarely cook

Often eat in „Mensa“

Price important

Barilla is quite expensive

Many varieties

In Italy it‘s less expensive

Cook to get fed

180 gr are enough

Last buy has been a while agoquick

Often don‘t have time to cook for a long time

Has to be prepared quickly

I like to spend more time eating than cooking

Steffi Graf is in a commercial

I recognized Barilla only after I saw advertisement

Cooking pasta takes almost too long for me

Down-to-earthLife style (german)

Package convenient

Package is in a nice blue with red letters

They also produce sauce

Buy other brand if cheaper

Lots of advertisingGood quality

Package is reusableAl dente

I don‘t know much about Barilla advertising

I don‘t like al dente

Their sauce hasn‘t a good taste

When I have no time, I‘m cooking noodles

250gr woould be better

Can be stored easily


I only buy Barilla

Prefer high qualityhealthy

Only durum wheat, no eggsI only uns fresh ingredients for pasta

Cook for or with friends

Pasta is presentable

Al denteSmack it on the flagstone,If it sticks it‘s „al dente“

Still al dente if it cooks too long

Cook for half the time, pour with oil,Put it in the fridge, reboil in water

No comemercial sauce

When I got time

Good food for my family

Nudeln machen glücklich

Minimum once per week

You can always eat pasta Good as main dish

Good as side dish

Many varieties Different noodle for every dish

Carton package

brick packages

Beats noodle machine

Good to open

Friendly blue color

It‘s stable

Can see inside

Ready to go

Not good for a diabetic

No wholemeal noodles

Quickly squishy

Harder to digest

On vacation in Italy

delicious Special feeling

With a camping grill at the beach

emotional/sensibleLife style (german)

Tells the right cooking time

But try to buy in offer

With recepee

Right sizeexpensive

wrong size

Only self prepared noodles are better

There‘s nothing more boring than pasta

Different sauce for every noodle

No cellophan

I know some old photos from Italy with pasta hanging in the street


Agenda

1. Innovation on packaging• Clasp• Size• Pasta with three corners

2. Innovation on pasta• Pressto

3. New products• Barilla Lifestyle Magazine


We found out that…

Customers want to be able to close half-used

packages

Different customers need different package sizes

Some customers do not have much time for cooking

Customers like the huge variety Barilla offers

Which innovation satisfies the statements?


Innovation 1: New Packages

Small variety packings

• eat as much as you want

• get a huge variety

Pasta with three corners

• 1 plate

• ready with cheese and sauce

Packages with clasps

• open and close as often as you want



Customers want to spend little time on cooking

Want to spend little money on pasta

Love the versatility of many varieties

Enjoy cooking together

Appreciate pasta as a healthy and fresh product



Innovation 2: fresh pasta tube

Press mechanism

Pressto can with dough

Pressto shape discs

Cutting mechanism

Press to have your own noodle


Innovation 2: Pressto

lowers cost

cook together

Fresh/healthy ingredients

fast cookingtime

versatility

Fresh noodles right into the boiling waterLess cooking time

Cut out middle part of productionlower costs - (but potential for profit generation)

Press whatever you want with custom shape discs

Put mutual effort into pressing your own noodlesDesign individual shapeGet crazy

Have more time for preparing healthy saucesandEnjoy fresh noodles



Customers like cooking with friends

Customers enjoy the Italian lifestyle - „Barilla is

Italy“

Every form needs different sauces

There is a need for fast cooking

There is a need for single person portions



Innovation 3: „Barilla – Lifestyle“ magazine

„Tagliatelle“

Published bi-monthly

•Every magazine contains a gimmick:

•CD with Italian music

•Barilla Pressto shape discs“

•180gr package with pasta

•Or pasta for special seasons (christmas, valentinesday, eastern, halloween)

•Recipes for sauces when pasta included

•Recipes for starters, main courses and desserts

•Recipes for fast dishes

•Recipes for a single person

•Recipes for cooking with friends

•Offers or proposals for gourmet vacations

•Proposals for wine

•Proposals for table decorations and Italian lifestyle at home (music, furniture)


Buon appetito!!!


Vision Material Packing

With what kind of food will you eat with the new mustard?

128 individual suggestions

What kind of ingredients should the mustard-dip contain?

141 individual suggestionsShipping of user innovation-toolkits to 100 participants Sales of prototypes demonstrate readiness to pay 4.10 € per jar of mustard

What will the label of the new mustard look like?

Prototyping-sheets for download on the platform(no graphic design-skills needed to participate)

Result:A mustard for dipping vegetables, fruits and crackers

Results:Mango-Curry, Plum-Cassis, and Wasabi

Results:Sketches showing stripes and fruits on a see through label

Figure 13.5: Catharina Van Delden The unserAller Product Design Process for Mustard*


Mari is going to introduce three kinds of mustard-dips, hence we need three different but compatible labels

Mango-Honey-Curry

Color of cap

Label design

Plum-Cassis

Color of cap

Label design

Wasabi-Dip

Color of cap

Label design

LABEL DESIGNFOR THE NEW MARI MUSTARD-DIPS

Toolkit 1: Material Toolkit 2: Label Design

Figure 13.6: Picture of the Two User Innovation Toolkits


Figure 13.7: Picture of the Three Collaboratively Developed Mustards


Figure 10.3: Karim Lakahni (Harvard)Participation [in open source program development]

is Highly Engaging

61.7% “This project is as (or most)creative as anything I have done”

72.6% “When I program, I lose track of time”

60.0% “With one more hour in the day, I would spend it programming”

48.4% “Like composing poetry or music”


[email protected]


Global memory

Large scale contribution

Wide-range distribution

High-speed interaction

Web 2.0

Figure 5.5: Kathrin MösleinTools for open innovation and their effects


Trend 3: Define Service Innovation

Service innovations improve how customers meet their needs and desires .

It can be understood both as a process of development within an organization and as the resulting configuration of new activities

by the company and by customers, suppliers and other actors within a specific context. Often the customer is directly involved in creating/consuming a service offering.


RationaleWorld economy is increasingly dominated by

service activity. Yet

More attention is given to products than services More attention is given to internal organizational decisions,

processes and structure than to customer experience More attention is given to research on service than to company

learning More attention is given to services provided by single

organizations than by inter-organizational service systems The fields of engineering, operations management and

marketing are discussing service, less attention found in strategy, human resources, and organization behavior

More concern for the economic drain of low-value-added services than the potential of service innovation for economic growth.


Service innovation typically means looking beyond the provider’s frame of reference

Quality of care

Latest technology

Physician credentials

Image and reputation

Convenient parking Evening appointments

Friendly service – bedside manner

Comfortable facilities

What the doctors seeThe patient’s view

Figure 3.1 Perceptions of attributes of health care services—patient and physician


Some features that affect customer perception from Schneider & White*

Goods Services Environment (actual or virtual)

Cost/Performance Features Functionality Constraints Reliability Serviceability Aesthetics Speed Reputation

Professionalism

Concern/Responsiveness Fit Interaction Trustworthiness Flexibility Recovery Reputation Cost/Value received

Accessibility Ambience Security Novelty Personnel Customer commonalities (buyers’ perceptions of their similarities and differences compared to other buyers)

*Service Quality. Thousand Oaks, CA: Sage (2004)


Exercise: Hybrid* Innovation

Divide into pairs. Choose either a specific automobile, or a specific vacation destination.

One partner individually lists service innovations, the other product innovations.

Brainstorm about hybrid combinations, develop the two most promising, and present.

* product and service provided simultaneously

See company examples at http://www.hybridvaluecreation.com/

66 (CHOOSING THE TOPIC)

BASIC RULES FOR CREATIVE BRAINSTORMING

• Generate a pool of possibilities

• Delay evaluation

• Expand the pool

– Piggy back, synthesize, etc.

• Evaluate

67 (CHOOSING THE TOPIC)

EXAMPLE: DESIGN A PEN

Size Shape Color Material Marker

small cylinder black wood graphite

medium sphere blue plastic ink

large box rainbow paper

ovoid marbled beet juice

School of Business

Conclusion


69

Basic innovation story• fueled by ideas from many sources• enabled by new technology• often an “end run” around established organizations• almost always strong negative reaction from established

players • far-reaching consequences for

- You- Your company- Your “industry” - Your region- Your country

Innovation

Reliability

Speed Cost

Key question, and project management has part of the answer


You will play a part as a manager in

• the way the world is understood

• the definition of problems

worth solving

School of Business OPEN Innovation Anne Sigismund Huff University of Ireland Maynooth.

Documents

Transcript of School of Business OPEN Innovation Anne Sigismund Huff University of Ireland Maynooth.