Point: Use open innovation challenges and prizes to inspire solutions, participation and collaboration from employees, partners and customers

Story: In 1919, New York hotel owner Raymond Orteig offered a $25,000 reward to the first person who could fly nonstop from NYC to Paris. Although various people tried, no one won the prize until Charles Lindbergh in 1927. Orteig’s prize, in turn inspired the X PRIZE foundation to offer the Ansari X Prize: a $10 million award in 2004 to the first team from private industry to devise a spacecraft capable of carrying three people 100 kilometers above the earth twice within two weeks. The goal of the prize was to spur private investment and develop a commercial space industry.

Erika Wagner, executive director of the X PRIZE Lab at the Massachusetts Institute of Technology, spoke about how prizes like the X PRIZE are useful to embolden entrepreneurs to take big risks. And, the fact of the substantial prize means that funders and financiers take notice. Ultimately, 26 teams competed for the Ansari X PRIZE and in the six years since the prize was awarded, more than $1.5 billion dollars in public and private funding has gone to support the private spaceflight industry.

Companies from Toyota to Eli Lilly to SAP have run challenges and offered prizes as part of their open innovation efforts through partners like InnoCentive. SCA, for example, a large, international consumer products organization, achieved a return on investment of 74%, with a payback period of less than three months as a result of using InnoCentive Challenges for open innovation in a major R&D division of the organization.

Some of the benefits of prizes are:
• Increasing the number and diversity of the individuals, organizations, and teams that are addressing a particular problem
• Paying only for results
• Attracting more interest and attention to a defined program, activity, or issue of concern (1)

I’ll be sharing more insights about prizes and ideas from the Innovation3 Summit in Orlando Dec 8-10, 2010 in the next post.  For now, here are some action strategies.

Action:

• Word your challenge precisely, around a well-defined problem, to get focused, on-target participation
• Think through all phases of the prize: how will you announce it? How will you determine the winner? How will you follow up to implement the idea?
• Be transparent throughout the process, explaining the criteria for selection of the winners, who will be selecting the winners, announcing and awarding the prize(s), etc.
• Acknowledge all participants, thanking them for their contributions and giving feedback to those who did not win, providing them with information that may help them in future challenges.

Point:  “Where” innovation comes from can be a place, a time, or a conceptual process.

Story: At Invention Machine’s Power to Innovate user conference, Jim Belfiore, Senior Director of Client Innovation and Practices, posed the question of where to innovate in this economy. Numerous presenters provided varied and surprising answers about where they find innovation and innovation-related opportunities.

First, “where” can be a literal place.  Mark Atkins, CEO of Invention Machine, discussed research on emerging markets such as China, India, Brazil, and other rapidly-developing emerging markets.  He cited data on the rise of innovation awareness and investment in these countries.  For example, a recent survey found that 52% of executives in emerging markets thought innovation was critical versus only 31% in the US and EU.  The same survey showed that more executives in emerging markets are investing in innovation than are their mature-market counterparts (85% vs. 53%).

The implication: companies should scan and analyze emerging markets for companies that might be disruptive competitors or that might become the company’s new suppliers, new manufacturers, or new distributors for addressing emerging market needs.  By answering “where” with emerging market players, companies can find new opportunities for collaboration.

Second, Dr. Charles Volk, Vice President and Chief Technologist at Northrop Grumman Navigation Systems, showed how innovation can be found in the past — “where” can be a point in time.  Volk’s division makes high-performance inertial navigation systems that enable aircraft and missiles to know exactly where they are, how fast they are moving, how they are oriented in space, and which way they are heading.  The devices represent more than 50 years of technological success, as well as some failures. Failures of the past, however, can be resurrected when new technology advances and obviates previous constraints.  The key, however, is to be able to access the prior work a company has done on a project, to avoid reinventing the wheel.  The challenge gets even bigger given that so many Boomers are retiring, taking past knowledge and lessons learned with them.  That’s one reason why Northrop used Invention Machine’s Goldfire tool to systematically capture and index legacy knowledge from disparate sources and formats.  According to senior scientist David Rozelle, for example, “Extensive efforts were put into feeding all HRG [Hemispherical Resonator Gyro] product-line documentation into state-of-the-art-knowledge base tools, including Invention Machine’s Goldfire system, to allow future engineers easy access to this huge amount of information through queries to the database.”

Third, Henry Gonzalez, Technology Fellow at Eastman Chemical Co, provided an external-source “where” example. Eastman,  a global manufacturer of chemicals, plastics and fibers, wanted to find a new application for one of its existing technologies. Eastman used Goldfire’s Innovation Trend Analysis and semantic capabilities to identify and target likely conferences and papers that could point to an answer. The results? A two-day effort using Goldfire yielded results that took an Eastman engineer 6-9 months to do previously. Eastman engineers were originally skeptical that a tool could help them be more innovative, but they were convinced by the results and are now expanding their Goldfire deployment.

Finally, Belfiore challenged people to look beyond their current S-curve of technology or product adoption to the next curve. More specifically, his answer to the question of “where” is to examine where your current constraints are. Then look to that as “where” to innovate before a competitor does. For example, in the energy industry, hydrocarbon production and supply are a challenge, with the constraints of cost, resources and environment impact. Most alternatives to the energy issue target eliminating hydrocarbon fuels by substituting wind or sun. But these next-generation solutions come with new problems, such as replacing the world’s fleet of vehicles and existing energy-delivery infrastructure if liquid hydrocarbons are no longer used. Joule BioTech, however, pinpointed fuel as its innovation place. Specifically, Joule focused on finding a new way to make hydrocarbon fuel that would reduce dependence on foreign oil and eliminate the carbon footprint of fuel. Joule disrupted the way fuel is made. Rather than start with a hole in the ground to reach fossil fuels, Joule created sunlight-driven bioreactors that could grow artificial microbes that produce ethanol and diesel. The microbes require only sunlight and carbon dioxide to produce ethanol and diesel, thus not only lowering the cost of production but also removing CO2 from the atmosphere.  When the fuel and diesel is burned in the car engine, therefore, no new CO2 is released. And, the fuel is used in the combustion engine just like gasoline, requiring no new infrastructure.

Action:

• Think about all the possible “wheres” of innovation.
• Look at the past for failed innovations that you can resurrect using new developments or to address new needs.
• Look at new markets and the new players arising in those markets as a new source, new collaborator, or new point of demand for innovation.
• Look beyond the current S-curve to create the next S-curve before the competition does.

For more information, on Northrop Grumman’s HRG project, see: http://www.es.northropgrumman.com/media/whitepapers/assets/hrg.pdf

Point: Creating new products & services for developing countries requires radical innovation and opens new opportunities in developed world markets as well

Story: GE Healthcare sells sophisticated medical imaging devices around the world. Historically, they have sold these high-end machines in emerging economies like India. But only 10% of Indian hospitals can afford a $10,000 ECG machine. Reaching the other 90% of the market takes more than simply cutting a few costs. It requires radical innovation and an in-depth understanding of local conditions.

For example, most Indians live in rural areas. That means they don’t have a local hospital to go to. Rather, the machine needs to go to them, and no rural healthcare clinic is going to lug a $10,000 machine into the field even if it could afford the device. Achieving the goal of a lightweight, reliable, simple-to-use ECG machine took radical re-thinking. GE built a device, called the MAC i, that could fit in a shoulder bag, has a built-in replaceable printer, and cost only $500. In addition, because the device would be used in rural locations with scant access to electricity, GE designed a battery that could do 500 ECGs on one charge.  To make it easy to use, GE designed the machine to have only three buttons. Finally, just because the device is inexpensive doesn’t mean it’s dumb.  Because the cost of a copy of software is zero, GE installed professional-level analysis software to aid rural doctors.

With its new MAC i, GE has unlocked a whole new market in developing countries.  Beyond that, GE has also opened up new opportunities back home — and that’s the reverse innovation side of the story.  How? The portable ECG machine with a $500 price tag is ideal for use in ambulances, saving lives of accident victims in rich countries as well.  Cheap, portable, and easy-to-use devices are desirable in any country.

Action:
Reverse innovation means designing a product for a developing country and bringing that innovation back home.

• Make the product extremely low in cost so that it is price-acceptable in developing markets and opens up new sales opportunities in developed markets
• Start from the ground up with a radical rethinking. (See also the Tata Nano example.)
• Plan for intermittent electricity
• Make the product modular to facilitate remote repair
• Make the product easy to use, like GE’s three-button ECG machine

Sources:

Vijay Govindarajan, “Reverse Innovation: A New Strategy for Creating the Future” HSM webinar March 18, 2010

Prof. Govindarajan will be speaking more on this topic at the World Business Forum in NYC October 5-6, 2009

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